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The Electric Sliding Scale

The Inflation Reduction Act passed the U.S. House Friday, and President Biden is expected to sign it this week. Though there is a lot of debate about how much it actually does to reduce inflation, if at all, but most people agree that it is the biggest climate action the country has ever passed. Will it help the climate or just enrich the companies that lobbied for the legislation? That remains to be seen.

One of the parts of this legislation people are excited about is the tax credit for electric vehicles. The $7500 tax credit for new EVs could even out the playing field, bringing the cost of going green more in line with gassier options.

But EV companies aren’t so thrilled. Restrictions on the credits include:

  • No tax credits for sedans over $55,000 or SUVs and trucks over $80,000
  • No tax credits for individuals who make more than $150,000/yr
  • No tax credits for EVs that are not produced in North America (this is what EV companies don’t like)

“Unfortunately, the EV tax credit requirements will make most vehicles immediately ineligible for the incentive. That’s a missed opportunity at a crucial time and a change that will surprise and disappoint customers in the market for a new vehicle,” John Bozzella, CEO of the Alliance for Automotive Innovation said.

There’s a chicken-egg quandary with this one. Will the domestic restriction limit options for consumers so much that they just opt for gas? Or is this the incentive EV companies need to move to more domestic production?

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